High-risk growth portfolio with tech concentration and low diversification

Report created on Dec 22, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily weighted towards the Vanguard S&P 500 ETF, which makes up 64% of the allocation. The remaining 36% is equally split among three tech stocks: Apple, Advanced Micro Devices, and NVIDIA. This composition leans heavily towards equities, with minimal cash holdings. While the ETF provides some diversification, the significant allocation to individual tech stocks increases risk. Consider diversifying across more asset classes to reduce volatility and enhance stability, especially during market downturns.

Growth Info

Historically, the portfolio has shown a strong Compound Annual Growth Rate (CAGR) of 26.89%, indicating substantial growth over time. However, it also experienced a maximum drawdown of -59.69%, highlighting significant volatility. This performance suggests that while returns have been impressive, the portfolio is susceptible to large fluctuations. Comparing this to a benchmark like the S&P 500, which typically shows lower volatility, underscores the need for diversification to mitigate risk.

Projection Info

The Monte Carlo simulation, which uses historical data to model potential future outcomes, suggests a wide range of possible returns. The median projection shows a significant increase, with a 50th percentile return of 9,812.19%. However, the 5th percentile indicates a potential downside risk with a return of 764.24%. While simulations offer insight, they rely on past data and cannot predict future events. It's crucial to consider this uncertainty and prepare for various market scenarios.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly composed of stocks, making up nearly 100% of the allocation. This lack of asset class diversification can lead to increased risk, as all investments are exposed to the same market conditions. Typically, balanced portfolios include bonds or other asset classes to cushion against stock market volatility. Consider adding fixed-income securities or alternative assets to improve risk management and provide more stable returns.

Sectors Info

  • Technology
    57%
  • Financials
    8%
  • Health Care
    7%
  • Consumer Discretionary
    7%
  • Telecommunications
    6%
  • Industrials
    5%
  • Consumer Staples
    4%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    1%
  • Basic Materials
    1%

With 57% of the portfolio in technology, there is a notable sector concentration. While tech stocks have driven recent performance, they can be volatile, especially during interest rate changes or regulatory shifts. Other sectors, like financial services and healthcare, are underrepresented. A more balanced sector allocation could reduce risk and capture growth opportunities across different economic cycles. Assess whether this concentration aligns with your risk tolerance and investment goals.

Regions Info

  • North America
    100%

Geographically, the portfolio is almost entirely focused on North America, with 99.6% exposure. This heavy regional concentration limits the benefits of global diversification, which can buffer against regional economic downturns. Expanding exposure to other developed or emerging markets could enhance diversification and potentially increase returns. Consider whether the current geographic allocation aligns with your global investment outlook and risk preferences.

Risk vs. return

This chart shows the Efficient Frontier, calculated using your current assets with different allocation combinations. It highlights the best balance between risk and return based on historical data. "Efficient" portfolios maximize returns for a given risk or minimize risk for a given return. Portfolios below the curve are less efficient. This is informational and not a recommendation to buy or sell any assets.

Click on the colored dots to explore allocations.

The portfolio's current asset allocation could potentially be optimized using the Efficient Frontier, which seeks the best risk-return ratio. This involves adjusting the weights of existing assets to achieve a more efficient portfolio. However, this does not necessarily mean diversifying into new asset classes. Consider rebalancing to ensure the portfolio remains aligned with your risk tolerance and return objectives, while maximizing efficiency.

Dividends Info

  • Apple Inc 0.40%
  • Vanguard S&P 500 ETF 0.90%
  • Weighted yield (per year) 0.62%

The overall dividend yield of the portfolio is relatively low at 0.62%, with the Vanguard S&P 500 ETF contributing the most. While dividends provide a steady income stream, this portfolio focuses more on growth than income. Investors seeking higher income might consider increasing exposure to dividend-paying stocks or funds. However, if growth is the primary goal, the current setup aligns with that objective.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.02%

The portfolio benefits from impressively low costs, with the Vanguard S&P 500 ETF having a total expense ratio of just 0.03%. This cost efficiency supports better long-term performance by minimizing the drag on returns. Maintaining low costs is a positive aspect of the portfolio, ensuring that more of the investment growth is retained. Regularly review fees to ensure they remain competitive and aligned with investment goals.

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